The savings in a Multilateral Netting System are large and understated. There are 2 main areas of savings:
1) Savings in the Banking System
- Payment costs are reduced because fewer payments are made
- Float. Concentration of payments and reduction in number of banks used leads to a reduction in float
- FX. Centralised and netting off. Remaining FX is dealt centrally at significantly better rates.
We estimate you will save at least 1% on all (unhedged) International payments made through the netting i.e. $10,000 on every $ Million. Please run the Netting Savings Calculator to see what savings you might expect to make.
Some examples of Savings
| Corporate | No. of Entities | No. Currencies | No. Invoices per Month | Gross Vol. per Month | Saving per Annum |
|---|---|---|---|---|---|
| Group A | 352 | 24 | 43,000 | $ 320M | $ 3,700K |
| Group B | 100 | 22 | 2,700 | $ 60M | $ 1,200K |
| Group C | 40 | 13 | 26,000 | $ 25M | $ 800K |
| Group D | 12 | 3 | 800 | $ 6M | $ 240K |
We estimate the saving from a corporate group between 0.1% and 0.4% of gross volume of intercompany.
2) Savings in Time and Effort
Simplified payment procedures across group
- One payment per month, simplifies in-house financing
- Brings structure and discipline to Intercompany
- Impacts on collection, cash flow, liquidity
- Visibility of Intercompany across group
- Internal payments are settled in due time
- Good forecasting of internal receivables
- Improvement of communication between units
- Disagreements between units are discussed and solved
- Huge reduction in internal mismatches at group level
A properly implemented and run multilateral netting system can be the most profitable corporate treasury vehicle.
Who Can Benefit from Multilateral Netting?
- Any corporate group or collective body with
- Reasonable cross border Intercompany flows > $10M per month
- Or Any corporate group where the Intercompany is a mess
Coprocess conducted a poll amongst users who attended the Coprocess User Group Meeting and these are the results
How important is netting to your company?
- Important - 34
- Very Important - 62
Do you think the benefits of multilateral netting are well known?
- Not at all - 14
- Somewhat - 14
- Yes to some extent - 41
- Yes to large extent - 28
Do you think the benefits of multilateral netting are understated?
- Not at all - 3
- Somewhat - 20
- Yes to some extent - 48
- Yes to large extent - 21
In the Corporate Treasury environment, do you think multilateral netting is underused?
- Not at all - 3
- Somewhat - 21
- Yes to some extent - 48
- Yes to large extent - 21
We asked our clients what is the single most important feature of intercompany netting?
